Divestments and How They Affect Medicaid Qualifications

Divestments and How They Affect Medicaid Qualifications

by | Mar 10, 2025 | 2025, Elder Law, Estate Planning

When applying for Medicaid in Wisconsin, particularly for long-term care services, one key concept to understand is divestment. Divestment refers to the transfer of assets for less than fair market value, such as gifting money or property to others, including family members, within a specific timeframe before applying for Medicaid. These transactions are closely scrutinized because Medicaid is a need-based program, and such transfers could be seen as an attempt to meet the program’s strict financial eligibility requirements.

In Wisconsin, the “look-back period” for Medicaid applications is 60 months (five years). During this time, all asset transfers are reviewed. If the state determines that divestment occurred, the applicant may face a penalty period during which they are ineligible for Medicaid coverage. This penalty period is calculated based on the value of the transferred assets and the average cost of nursing home care in the state.
Importantly, Wisconsin Medicaid does not allow general exceptions for gifting assets, even to children or other family members. Common misunderstandings arise from the belief that small or “reasonable” gifts, such as financial help to children or contributions for weddings or holidays, are permissible without penalty. However, under Medicaid rules, any transfer for less than fair market value can trigger penalties, regardless of intent or recipient unless it meets one of the very narrow and specific exceptions under the Medicaid rules.

The exceptions include the following:
• Transfers between spouses
• Transfers to a blind or disabled child
• Transfers to a trust for a disabled individual who is under age 65
• Transfer of the primary residence to a spouse, a child under 21, a child of any age who lives in the home and has provided care for at least 24 months prior to a nursing home admission or to a sibling who has an equity interest and has lived in the home for a least one year prior to nursing home admission.
• Transfer of an asset for full fair market value
• Transfers made with no intent to qualify for Medicaid

To avoid costly penalties, individuals should plan carefully and consult with an elder law attorney or Medicaid attorney. Proper planning can help protect assets while ensuring compliance with Wisconsin’s Medicaid rules. Understanding and adhering to these regulations is essential to ensure a smooth application process and avoid delays or denials of much-needed benefits.

If you have questions regarding divestments or Medicaid qualifications please make an appointment with one of our skilled elder law attorneys.

Medicaid Myths and Truths

Medicaid Myths and Truths

by | Jul 11, 2024 | 2024, Article, Elder Law

Medicaid Myths and Truths, Attorney Amy Eddy

The cost of nursing home care can be substantial, leaving many people wondering when Medicaid will cover long term care costs.  Medicare only covers a small amount of nursing home costs under limited circumstances.  As a result, many seniors will rely on Medicaid, provided they meet the financial eligibility requirements.  Below are some common “myths” about Medicaid eligibility.

Myth: You have to give away everything you own in order to qualify for Medicaid.

Truth: If you need nursing home care for other than a short-term rehabilitative stay, you will be expected to pay the private pay rate unless your assets are below a certain threshold as follows:

  • A single applicant must have under $2,000 plus exempt assets;
  • A married couple who both need care must have under $3,000 plus exempt assets;
  • A married couple with one spouse who needs care and one spouse living at home can keep between $50,000 and $154,140.*

Exempt assets include a vehicle, personal property, a funeral trust, and life insurance if the death benefit is less than $1,500. If an applicant for Medical Assistance is married, the residence is not a countable asset as long as the spouse is living in it, and the retirement assets of the spouse in the community are also exempt.

 

Myth: You will be penalized for five years if you give anything away to qualify for Medicaid.

Truth:  Not exactly.  If you give money or property to your children, or to anyone else, you will be temporarily disqualified from Medicaid eligibility if the gift was made within five years of applying for Medicaid. The recipient of the gift is not required to return the money or property, nor are they otherwise liable for your care costs. The gift is called a “divestment” under the Medicaid rules.

  • “Divestment” is the disposing of assets for less than fair market value. If an applicant for Medicaid has divested assets within five (5) years of applying for Medicaid, a disqualification period may result, which means that the institutionalized person will be ineligible for Medicaid for a period of time. The penalty period is calculated by dividing the total divested amount by the statewide average nursing home cost of care (currently $315.61 per day)* in effect at the time of the Medical Assistance application. This number is the number of days of disqualification.
  • The start date for the period of ineligibility will be (in most cases) “the date on which the individual is eligible for Medical Assistance under the State plan and would otherwise be receiving institutional level care . . . but for the application of the penalty period.” 42 U.S.C. §1396p(c)(1)(D).

 

Myth: You may give $18,000 to each of your children as a way to protect it from the nursing home and it will not be a “divestment.”

Truth. Divestment includes transfer of any assets without any dollar limit. Assets are defined as “all income and resources of the individual or the individual’s spouse, including any income or resources which the individual or such individual’s spouse is entitled to but does not receive . . .” 42 U.S.C. § 1396p(e)(1).  The $18,000 gift amount is the amount that is exempt from gift tax reporting in 2024.*  There is no exempt amount for a divestment.

 

Myth: A revocable trust will protect your assets from the nursing home.

Truth. If income and principal are available to the Grantor, the assets in the trust are available to pay for nursing home care and are not protected. A special needs trust can be used to protect the assets of a disabled individual who is now receiving public benefits, or who may become eligible for benefits in the future.

 

Myth: If you are married and your spouse is in a nursing home, he or she can qualify for Medicaid if you put all of your joint assets in your name.

Truth: Assets are counted, regardless of which name they are in. Furthermore, Marital Property Agreements are disregarded for Medicaid purposes.

 

For answers to more Medicaid questions and concerns, consult with one or our experienced attorneys who practice in elder law and disability planning.

*Amounts change annually and are listed in this Article as of June, 2024.

What is Elder Law?

What is Elder Law?

by | Mar 11, 2024 | 2024, Article, Elder Law

We are often asked What is elder law? While the definition of “elderly” is the subject of some debate, the most common defining point is someone who is 65 years or older, as that is when federal Medicare benefits begin. Elder Law, much like “Family Law” or “Employment Law” is an umbrella term for a broad-based area of law.  For Elder Law attorneys, this consists of multiple areas of practice that relate to older adults, individuals with disabilities, and those who care for seniors and disabled individuals, including:

  • Health Care and Legal Capacity
  • Public Benefits (e.g. Medicaid and SSI)
  • Special Needs Trusts
  • Long Term Care
  • Asset Protection and Nursing Home Planning
  • Wills, Trusts, and Powers of Attorney
  • Probate and Trust Settlements
  • Guardianship and Conservatorship

The term Elder Law can be somewhat confusing because most Elder Law Attorneys also focus on solving legal problems for individuals with special needs, regardless of age.

The National Elder Law Foundation (NELF) defines Elder Law as follows:

“Elder Law” is the legal practice of counseling and representing older persons and persons with special needs, and their representatives about the legal aspects of health and long-term care planning, public benefits, surrogate decision-making, legal capacity, the conservation, disposition and administration of estates and the implementation of their decisions concerning such matters, giving due consideration to the applicable tax consequences of the action, or the need for more sophisticated tax expertise.”

NELF is the American Bar Association-approved agency that certifies attorneys as a Certified Elder Law Attorney (CELA). There are less than 15 CELAs in the state of Wisconsin. To become a CELA one must have enhanced knowledge, skills, experience, and proficiency in the field of elder law. The attorney must complete an exam and be certified by the National Elder Law Foundation Board. Attorneys must complete 75 hours of continuing education in the elder law field every five years.

If you or a family member require an elder law or special needs law attorney please contact our office.

 

Guardianship Training is Now Required

Guardianship Training is Now Required

by | Nov 20, 2023 | 2023, Article, Elder Law

As of January 1, 2023, Wisconsin law requires all new individual guardians to complete a state-approved training course. Prior to this year, Wisconsin only required corporate guardians to have formal training. Now every individual who is nominated to be the guardian of a person or of the estate (the assets and finances of the person) must complete training on a variety of topics, and submit a sworn, notarized affidavit attesting that the training has been completed before they can be appointed guardian.

Wis. Stat. § 54.26 sets forth the required areas of training, including the following:

  • The duties and required responsibilities of a guardian under the law and limits of a guardian’s decision-making authority.
  • Alternatives to guardianship, including supported decision-making agreements and
    powers of attorney.
  • Rights retained by a ward.
  • Best practices for a guardian to solicit and understand the wishes and preferences of a ward, involving a ward in decision making, and taking a ward’s wishes and preferences into account in decisions made by the guardian.
  • Restoration of a ward’s rights and the process for removal of guardianship.
  • Future planning and identification of a potential standby or successor guardian.
  • Resources and technical support for guardians.

In most cases, it is a family member who is petitioning for guardianship of a loved one, and they often have misconceptions about what guardianship is or is not. Many are not aware of the responsibilities that they will have as guardian, or that there are a number of ongoing administrative requirements they will be required to complete. The court system is not equipped to provide guidance and advice to guardians on an ongoing basis, which can leave guardians feeling overwhelmed and lacking support. Training for guardians can be vital in helping guardians know what to expect and how to address concerns as they navigate their ongoing role as guardian.

The training must be completed no later than four days (96 hours) before the final guardianship hearing, and must be completed by the nominated guardian of person or estate, as well as any standby or successor guardians of person or estate. The training is free and available as a self-paced, online course. https://www.uwgb.edu/guardianship-training/

If you have questions on guardianships or the required training please reach out to one of our experienced attorneys.

Stepping Down as a Presonal Representative

Stepping Down as a Presonal Representative

by | May 1, 2023 | Article, Estate Planning

There are a number of factors to consider before agreeing to take on the responsibility of serving as Personal Representative of someone’s estate. If a friend or family member has asked you to serve in any of these roles, it is important for you to think carefully about your ability to take on the responsibilities of the role and whether you are prepared for the legal obligations expected of you. As an attorney who practices in the estate settlement area, I have helped numerous Personal Representatives successfully handle estate administrations. The job of Personal Representative, however, can be somewhat daunting to someone who has never had the experience of serving, and should not be taken lightly.

A Personal Representative (also called “Executor”) is the person appointed to administer the estate of someone who has passed away. The Personal Representative is responsible for gathering and safeguarding the assets of the deceased, ensuring that all debts and expenses of administration are paid, and distributing the deceased person’s assets to the beneficiaries named in the deceased person’s Will. In addition, the Personal Representative is responsible to report to the Court during the various stages of administration of the estate.

Importantly, being named in a person’s Will is only a nomination, not an actual appointment. Before serving, a person nominated as Personal Representative must first be appointed by the Court before they can officially serve in that capacity.

What factors should you consider when deciding whether or not to accept the nomination?

  • Do you have the skills necessary to serve? A Personal Representative must be well-organized, detail-oriented, and have the ability to take on the responsibility of handling the financial assets that belong to the estate.
  • Do you have the time necessary to serve? Consider how close you live to the decedent. The estate will be handled in the county where the deceased passes away, and there will likely be financial institutions, agents, accountants and legal professionals that you will need to meet with in the decedent’s county of residence. There may be multiple beneficiaries that require your time and patience to explain the process and timelines.
  • Are you comfortable with the responsibility of acting as a fiduciary? A fiduciary’s duty is the obligation to act in someone else’s interest rather than your own. While that may seem like a common-sense approach to handling the estate of someone who has died, the most common disputes in probate administrations involve accusations that a personal representative has breached their duty to administer the estate in the best interest of the beneficiaries.

What if you decide not to serve? If you consider all of the factors and decide you do not want to take on the role as Personal Representative, the next steps depend on timing.

  • Before Death Occurs
    If someone asks you to serve as Personal Representative or notifies you that they have already named you in their Last Will and Testament, you can still decline the role. Simply advise them that while you are honored to be considered, you are unable to accept. If the Will has already been prepared, they will need to notify their attorney that an amendment, or Codicil, will need to be prepared to change the provisions regarding the nominated Personal Representative.
  • After Death but Before Appointment
    If you are nominated in the Will, but have not yet been formally appointed, you can notify the beneficiaries and heirs that you do not intend to serve. You should then file a Declination to Serve with the probate court. Most Wills provide for an alternate Personal Representative to serve in the event the first nominated Personal Representative is unwilling or unable to serve.
  • Resignation After Acceptance
    If you have already been formally appointed as the executor by the probate court, but wish to resign, you must file a formal resignation with the probate court. The Court may require a hearing to accept the resignation and notice will need to be given to the heirs and beneficiaries before a new Personal Representative can be appointed. You may continue to have ongoing responsibility to protect the estate until the new Personal Representative is issued letters of authority to act on behalf of the estate.

Relinquishing the responsibility to act as Personal Representative should not be taken lightly. If you have already been appointed by the Court, it is important to seek legal advice about best practices for discontinuing your responsibilities while protecting the estate and the rights of the heirs and beneficiaries. Please reach out to one of our experienced estate planning attorneys to help with this process.